FIG AVENUE INVESTMENTS

Australian economy

The RBA continued to raise interest rates in August with inflation still remaining the number one concern. Prices are still growing at 30 year highs, whilst the unemployment rate sits at just 3.4%. Underemployment, however, seems to have bottomed out, with full-time employment numbers dropping considerably in August¹. 

International economy

Whilst the Covid-19 jump in US manufacturing seems to have subsided, manufacturing activity and factory orders remain in buoyant territory. This is despite the current tightening of monetary policy in the US and the rising cost of capital that is likely to start impacting capital-intensive industries¹. 

Investment Markets

3 years ago, volatility in the market started to pick up as fears of an impending recession began to spread. Instead, however, we got something much worse (i.e. pandemic) and the markets rallied after a quick dip to impressive highs. After the most recent market correction, most equity markets around the world have given up much of their gains, with the US and Japanese share markets amongst the only ones to have averaged double digit returns over this period. Over the same period of time, Aussie shares have given investors total returns of around 6% p.a.².

Outlook

The trajectory of interest rate rises in the US and Australia will continue to captivate the market place. Expectations of further rate rises of over 1% into 2023 would translate to plenty of pain for mortgage holders and it will be interesting to see whether central bankers have the will to stick to their renormalisation plans.

S&P/ASX200 - 12 months to 31 August 2022